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Analysis Assignment: Below is an economic scenario that is based on a fictional economy that has recently come out of a recession but has not fully-recovered and is still in a volatile stage. Assume that you are an economic advisor. Read the scenario which includes several issues the economy is facing. Your assignment is to (1) Identify three issues that you believe should be addressed in the next 1 to 2 years in this fictional economy to ensure the economy continues to grow, (2) Justify why the issues identified are the most crucial issues using 100 to 150 words and (3) Clearly outline your economic recommendation(s) for addressing each of the three issues in 500 to 700 words. You may have one recommendation per issue or one recommendation that will solve all the issues or a couple of recommendation for the three issues. The amount of recommendations does not matter as long as the recommendation(s) can solve all three issues identified. Be sure that a recommendations you identify to help one issue does not hurt another issue you identified. You can use sources to support your recommendation. You will be graded on the criteria in the rubric below.
A successful analysis will follow the rubric criteria below which includes:
Demonstrating a deep knowledge of macroeconomics
Justifying why the three issues identified are important issues to address right away.
Providing economically clear and sound recommendations that will effectively handle the issues identified while helping to improve the economy and ensuring the economy does not dip back into another recession.
Providing specific recommendations. For example, if you recommend a change in government spending, indicate what the government should increase or decrease their spending on. If you recommend tax decreases or increases indicate for who (e.g., All Households? Businesses? Middle Class? Low Income Earners? Top income earners?) If you decide to use monetary policy, indicate what tool you would use (e.g., change interest rates? Buying or selling of securities by the Fed to increase money supply?).
Discussing the economic policy (fiscal and/or monetary policy) that is recommended to address identified issues. Fiscal policy includes changes to taxes and/or government spending while monetary policy includes changes to interest rate or money supply. The analysis should mention if the recommended economic policy is expansionary or contractionary. Also if no economic policy is recommended (e.g. laissez-faire approach), the analysis should justify why discretionary fiscal or monetary policy is not needed and/or justify how a laissez-faire approach will help the economy self-correct.
Incorporating two or more economic theories (e.g., C, I, G, Xn, Aggregate Demand, Aggregate Supply etc.) and accurately utilizizing economic theories and terms
Meeting the length requirements and being well organized with accurate grammar and spelling with a structure that is logical and easy to follow
Economic Scenario to Use for Analysis: This fictional economy has recently come out of a recession and has seen a decrease in the unemployment rate from 7.8% last year to 6.7% this year. Although the unemployment rate has declined over the past year, it is still above the natural rate of unemployment in our economy is about 5%. GDP growth was 2.0% last year and 1.9% the year prior. This particular economy has been importing more than exporting to other countries. The housing market has started to rebound with less foreclosures but consumers are still be a bit skeptical about the economy so consumption growth has been only about 1% in the past year. Investment by firms has remained stagnate with very little growth. The consumer price index has shown an inflation rate of 1.8% this past year which was up a bit from 1.5% in the previous year. The federal minimum wage rate is $7.25 an hour which is about $14,500 per year for someone working 40 hours a week 50 weeks out of the year. The median wage for the middle-class in this economy has decreased by 5% in the past 10 years and their wealth has decreased by 28% while the wealthiest one percent has 288 times more than the average middle-class family. Due to the governments increase in spending over the past couple of years to help stimulate the economy in an effort to get the economy out of the recession, the national debt has increased $12.9 Trillion 4 years ago to $17.7 Trillion this past year. Much of the debt increase was due to government spending that occurred to stimulate economic growth when the economy was in the Great Recession.
